MUMBAI: Some automobile manufacturers who had increased supply to dealerships to meet a temporary rise in demand during the festive season are now adapting production to the grim reality of slackened demand post the festival season by opting for 'block closures' in November. Much of Pune's automotive cluster will remain shut till November 9, and in some cases till November 11, say industry officials. The companies opting for a prolonged November shutdown include Mahindra & Mahindra, Tata Motors, General Motors India and Volkswagen India. The manufacturers have extended their traditional Diwali holidays of 2-3 days (November 1-3) to a week to bring inventory in line with demand; some companies have scheduled a maintenance shutdown.

Several vendors catering to the four automakers say production plans for November assume output which is 10% to 50% lower across various models. "Due to the weak demand, M&M and Tata Motors have produced 10%-15% less than they had planned for October. For the month of November, the first 10 days of the month are holidays, so effectively the production has come down by 25%-40% over the last few months," a vendor said, requesting anonymity.

Without denying or confirming the development, the Tata Motors spokesperson said: "At Tata Motors, our production plans are continuously calibrated keeping in mind estimated demand, and our stock in the channel and in our stockyards. New vehicle demand is subdued due to poor load availability, increasing operating expenses and commensurate freight rates, which is a reflection of the state of the Indian economy."

Toyota Kirloskar, the maker of Innova and Corolla, has already announced the company would be moving to a single shift in November. Pravin Shah, chief executive, automotive, Mahindra & Mahindra says the 'no production days' in the next week is part of the company's annual maintenance shutdown plan. "This was planned right at the start of the year in co-ordination with our workers' union. It has got nothing to do with the demand environment, and our sales in October have grown over September. And generally during Diwali, the level of absenteeism is more, so it makes business sense to not produce when the attendance is low," Shah said. The Volkswagen India spokesperson, too, claimed the maintenance shutdown was planned and the company was on course to meet internal production target for the end of December.

P Balendran, vice-president, General Motors India, confirmed that the Talegaon plant is closed for five days next week and the Halol plant for three days on account of Diwali Holidays.

"Normally, we observe a three-day holiday during Diwali with some adjusted off-days having worked on Sundays/other holidays. This year, in the case of the Talegaon plant, it has been extended by two more days as we had combined maintenance shutdown for the plant together with the Diwali holidays," Balendran said.

Traditionally, the automotive industry shuts down for maintenance twice a year. The first shutdown is generally in June or July and the second takes place in the last week of December, as companies try to prune inventories at the year-end. But weak demand may have forced these automakers to advance the shutdown.

Some carmakers such as Hyundai, Ford and Honda Cars India are operating at full capacity thanks to good response to new models and rising exports.

In the first half of the festive season, which saw the festivals of Onam and Ganesh Chathurti among others, there was a marginal uptick in volumes.Nonetheless, sales of passenger vehicles for the first six months of FY-14 declined 5%.

Even before Navratri, inventories were high, at around 6-8 weeks in case of some brands. Despite a pickup again on account of buying during Navratri and Dussehra, passenger vehicle sales declined marginally in October by about 1-2% to 2.28-lakh units. The only segment that saw growth was utility vehicles, which posted a growth of 5-6% units led by Ford EcoSport. Total sales were just over 55,000 units.

"It is very unusual for the companies to shut down in November. It could be an indication of stock build-up at the plant for some of these manufacturers. On a wholesale level, the sales in the month of October have declined. The buying was relatively better during the festive season, but not as good as has traditionally been the case, where one sees a growth in double digits," said a senior executive at an MNC, who spoke on condition of anonymity.

The only manufacturers posting decent sales numbers are the ones with new models (such as Hyundai Grand i10, Honda Amaze and Ford EcoSport) or those with a deep rural reach like Maruti Suzuki. "The models recently introduced are doing reasonably well; otherwise it is a lacklustre market. The inventory levels are not decreasing, the inventory levels at the plant and stockyards are high, that is precisely why one is seeing immediate inventory correction," said MS Kochar, advisor to Federation of Automotive Dealers Association.

There has been a marginal improvement in sentiment during the festive season. Walkins have increased and the sales numbers have crossed 2,00,000 units in October. But with the festive period over, the rest of the year looks tough, say industry players.

"The marginal sales rebound seen in September/October is on account of the festival season combined with the emerging demand for new models. We feel that the industry is under stress and, basis the initial feedback for the month, the industry will again show a decline vs last year. Although November and December are low months, we are going to be at par with November last year although the industry in general is expected to be down. Besides, customers also postpone their purchase decisions in the months of November and December seeking model year change," said Balendran.